RDR - Feedback Submission

 According to our sources, only around 300 out of 29,000 regulated firms actually responded to the FSA's Discussion Paper (DP07/1), "A Review of Retail Distribution" by 31/12/2007.  Given that the RDR is the latest and without a doubt the most significant of the FSA's social engineering initiatives, one wonders why so few firms participated in the feedback process?  I came up with the following possible explanations:

1. A world-weary cynicism with the whole process - one has a sense of inevitability over the way in which our profession is being frog-marched in a direction that, ultimately, only serves the interests of either bureaucrats, or powerful interest groups such as the highstreet banks.
2. The FSA's formal review questionnaire invited carefully prescribed answers to only the issues which the FSA is interested in receiving feedback on.  No doubt, many practitioners reading it through would have swiftly realised that it would not allow them to communicate the important issues which really need highlighting.
3. Many of the proposals in the RDR simply do not relate to the professional practices of Independent Financial Adviser/Planner firms, and one is left with a dangerously misleading impression that little of this is of relevance to our clients, and our businesses.  Unfortunately, this is very far from being an accurate conclusion.
4. Those IFA firms which found themselves on the receiving end of a telephone enquiry from an external firm, conducting research on behalf of the FSA into the RDR, will no doubt have concluded that the whole exercise is so half-baked that it would be almost impossible to make an objective contribution that will add value.
5. In the runnup to the Christmas break, most businessmen have other priorities on their minds.

In the event, 2020 Financial Services actually made four feedback submissions: (i) an initial general feedback by letter; (ii) completion of the FSA online questionnaire; (iii) participation in the meaningless telephone interview on behalf of the FSA, and (iv) a more detailed feedback letter, citing specific problem issues enshrined in DP07/1.  Essentially, we felt that the RDR suffers from several rather fatal flaws:

• the confusion of financial planning/advice with 'distribution of retail investment products'
• the reclassification of 'clients' (with whom one has a relationship) as 'consumers' (whose only function is to...er...consume)
• the impossibly impractical distinction between 'Primary Advice' and 'Professional financial planning and advice', with the somewhat comical mental picture of either the adviser stopping the advice process, and pushing the client through another door to a complete stranger, or the adviser wildly swapping hats at intervals during meetings with clients (sorry, consumers)
• the wholesale disenfranchisement of a section of our clientele, who currently enjoy independent financial planning, but under the proposed regime would simply become fodder for the banks' strongarm tactics under 'Primary Advice'
• the same, interminable emphasis on a "misalignment of advisers' interests with those of consumers" being the result of commission-based advice, rather than the more practical realisation that such 'misalignments' can occur across quite different remuneration structures
• the wildly idealistic suggestion that 'consumers' require exactly the same level of technical information about investment products, as is available to advisers (since when has that been a requirement in any other retail product?)

The RDR is predicated upon what is, after all, something of a statement of belief: the current system is broken we are being told, time and time and time again.  Most readers will understand that a perspective or viewpoint begins to achieve credibility the more it is put about, and this is precisely what we have seen happening over the last two years.  The FSA's own publications evidence a high degree of self-referencing - and thus DP07/1 refers the reader back to Callum McCarthy's speech in September 2006.  The point is that the act of self-referencing does not make those earlier statements more right than they were then, nor does it enhance the integrity or accuracy of assumptions made in DP07/1.  We might call this approach 'Regulation by Rumour'.

Clearly, as financial-planners, we work in a discernibly flawed world.  The systems we have access to don't work properly.  Very often the processes operated by product-providers are inefficient.  These days we get paid a lot less for work that is much more onerous than it was a decade ago, thanks to the Bog of Bureaucracy.  We would have to be living on Planet Zog to believe that all is well in financial services.  But, "is the present business model bust?" as the FSA would have us believe?